This is the slightly crazy story of how my husband and I came to be homeowners just under the wire of turning 30.
Disclaimer: Home ownership is definitely NOT the only way to be an “adult” and is not right for every place and every person. If you want to rent forever, that’s totally fine. If you’re a “tech-preneur” who changes zip codes every other month, that’s great and I’m a little jealous. This is just the story of our own experience, and some insights gained in the process.
So, we may or may not have bought a house in another state, hundreds of miles away from where we currently lived, on a whirlwind spur-of-the-moment weekend, without telling a single soul. Not that this truly surprised anyone who really knows us.
After years of slowly upgrading from 1 bedroom, to 2 bedroom apartments, to rental houses (in 2 states, 1000 miles apart) and saving for a very long time, we were finally “ready” to take real steps to homeownership.
We knew what we were looking for in terms of general location, price range, bedroom count, etc. We wanted a fenced in yard for the pups, and newish construction (I do NOT want to deal with faulty wiring or rusty pipes from the 40s. No thanks.). But, we were also looking to move to a different state. So all the looking would have to be done online, from far away.
So, there would be a lot of trust involved, and we knew the most important part would be finding a real estate agent to work with that we could trust. The steps we took are below.
- We googled a list of realtors in the area, and looked up their online reviews
- We contacted the top 5 via email
- The ones that replied the fastest, and with a through and friendly response, we gave our list of must-haves and they started MLS searches for us
- We watched those listings for months. We Zillow-ed, we Google-ed, we learned all we could about the market in certain areas and what was or was not a good deal
- When we found one that met all our requirements, as well as most of our nice-to-haves, we POUNCED
- We flew into town, toured it, and had an offer signed and submitted within 24 hours of seeing the listing, and had our offer accepted 2 days later
- We panicked. Then we celebrated. Then panicked some more. Then we got on with life, and 30 days later, we closed
- We moved!
So how did we do it? Agonizingly slowly, with tons of reading and question asking and help. We essentially followed the steps below.
Know what you do (And Do Not) want
This is the first step if you are thinking about buying soon. Talk with your partner (or if you’re buying a house, solo, good for you! No compromises necessary) about what you do and do not want in your future home. Take into consideration the obvious things like the number of bedrooms and bathrooms, square footage, and location.
But also think about if there are certain features you desire like a fireplace, a large kitchen, washer and dryer on the ground floor or second floor, lots of windows, “green” appliances and features, amount of yard space, landscaping, whether you want lots of trees or open spaces.
Discuss what the next 5-10 years will entail; do you intend to adopt pets? Is there a chance you will have a child/children? Will you be changing careers anytime soon? Buying or selling a car? These will all affect the amount of space you need, and maybe what school districts you should be looking into.
And most importantly, set yourself a budget. Play with some mortgage calculators so you know what approximate monthly mortgage payment comes with a 100K, 200K, or 300K home. Know how your rate changes that payment, as well as how big of a down payment you can come up with.
Learn about things like mortgage insurance (if you have less than 20% down), HOA fees, closing costs, and other expenses that will inevitably come up, and budget accordingly.
The biggest mistake you can make on your first home purchase is to buy so much house that you are on a razor thin budget each month, such that one job loss or medical expense or dead car transmission will make you unable to afford the mortgage.
And once you decide on a number, stick to your guns, no matter how much more the bank may say you qualify for, or how pretty the homes your realtor may try to show you above your comfortable number.
Build a good team & rapport
Our realtor was amazing to work with, given the long-distance challenge. He was extremely responsive, in person and by phone. He had lots of experience helping people relocating to the Triangle area, so he knew all the digital tricks of signing online and what was required when.
He gave us referrals for our mortgage loan as well as our home inspector, and home insurance, all things that would have been a huge headache to figure out on our own from another state. Taken care of, easy peasy. We just had to show up at the required moments (signing the offer, and closing).
Therefore, do your homework. Ask around if you know anyone in the area. Send lots of emails, make lots of phone calls. Find someone that you click with and feel comfortable talking to. Someone who seems like they truly care about what you are looking for and want to help you.
And be nice to that person, and all the people on your team! Say thank you, make sure you communicate clearly, and let them know you appreciate their help.
Don’t be afraid to ask questions!
Your realtor, loan officer, inspector, and the internet are all here to help. The realtor and loan officer stand to make a pretty chunk of change from the cash YOU are about to lay down, so definitely don’t feel bad asking their advice and opinions.
Do take what they say with a grain of salt, because of the aforementioned conflict of interest (they want you to spend more money so their share of it is bigger). But they do know the business (probably, ask how long they’ve been doing real estate first) and will be a well of knowledge.
The only silly questions are the ones you don’t ask.
Know your budget
As mentioned earlier, make sure you know not only what you can afford but what you’re comfortable with laying down. Banks LOVE people who stretch their budget to the max, because the larger the loan the more interest they can charge on it. And realtors will never say to no a larger commission. So make sure you know not only your maximum, but also the range you are more comfortable with.
And remember the 30% rule saying you should only spend 30% or less of your take-home income on housing? That is not always true (actually, not even sometimes), as it greatly depends on the area you live in, and what your actual take-home income happens to be. 30% of 20,000 and 30% of 200,000 are vastly different numbers.
Just use a basic mortgage calculator to figure out an approximate monthly number you can live with and still have breathing room. Take a look at your current budget, and if your housing expense now for rent is fine, then consider a mortgage that amount to your rent your maximum.
For example, if your rent right now is $800, then you can afford a house for $185,000 with a 10% down payment. You have to save up the $18,500, plus about another $9000 for closing costs. Then your mortgage, at 4%, would be $794.90/month.
Expect delays, complications, and unexpected fees
In addition to knowing your budget range (see above) you should build in a good-sized cushion for closing costs and other fees. The number commonly thrown around is 2-5% of the house’s cost in closing fees, and on average across the country buyers spend roughly $3,700 in fees.
There will be an origination fee for your loan, earnest money when you put your offer in, credit report fees, realtor fees, document fees, insurance and taxes, appraisal fees, costs for inspections and repairs, and all the little things you don’t think of that immediately pop up (like changing the locks!).
It seems overwhelming, I know.
But just breathe, it’s a lot less scary if you know it’s coming and you’re braced. So if you want a house in the $200,000 range, plan for $40,000 for down payment, and another $4,000 – 10,000 for fees. I always estimate high just in case, so in this scenario I would start house-hunting once I had ~$50K saved.
Or, if you go with a different type of loan, you may be able to put far less than 20% down. Just know the trade off is an extra mortgage insurance payment every month, and more interest over the life of the loan.
Be patient, but be ready to pull the trigger
Once you have a good team in place helping you find that diamond in the rough, and you know your numbers, be ready to roll when you find the right place.
I’ve talked to many people, and have had several of my own experiences, where you find “the one”, only to hem and haw and think about it, and then when you go to make an offer, find out it is already under contract. Boo.
If you’ve done your due diligence, trust your numbers. Put in your offer, and hold your breath.
When we got the call that our offer had been accepted, we definitely did a happy dance around the living room! It’s a very exciting thing.
But, this is not the end! You still have the due diligence period, where the lender is running the numbers, you are (hopefully) having inspections done and possibly repairs by the seller, and anyone can still change their minds and back out.
The due diligence period is typically 30-45 days, and you will have at least an inspection to do. They will give you a list of every possible thing they find ‘wrong’ with the house, from a broken dryer vent to a lack of insulation in the attic.
Talk with your realtor about asking the seller for any repairs or concessions. You have some room to bargain here! Maybe they will pay for a leaky sink repair, or give you a few thousand dollars off the asking price to fix it yourself.
You can’t get what you don’t ask for.
And once you finally are sitting at the closing table, signing what feels like a hundred pieces of paper, it can be super scary! But enjoy this feeling, and the fact that all your hard work of searching has paid off. And brace yourself for the next step… moving!
Happy house hunting!